Contract LawElena m luca

Classification of Terms

Condition - Breach of a condition entitles the claimant to repudiate the contract.

Warranty - Breach of a warranty entitles the claimant to claim damages only but not to repudiate the contract

Innominate Term - Court considers the consequences of the breach and then decides the remedy

Conditions

A future and uncertain event upon the happening of which certain rights or obligations will be either enlarged, created, or destroyed.

An express condition is clearly stated and embodied in specific, definite terms in a contract, lease, or deed.

Such as the provision in an instalment credit contract that, if the balance is paid before a certain date, the debtor's interest will be reduced.

An implied condition is presumed by law based upon the nature of a particular transaction and what would be reasonable to do if a particular event occurred.

If a woman leases a hall for a wedding on a certain date, her ability to use the hall is based on its implied continued existence. If the hall burns down before that date, use of the hall is impossible due to fire; therefore, the law would imply a condition excusing the lessor from liability.

A condition precedent must occur before a right accrues.

A woman may convey her house to her son based on the condition that the son marry by the age of twenty-five. If the son fails to marry by that age,he has lost his right to the house.

A condition subsequent means that a right may be taken away from someone upon the occurrence of a specified event.

An owner of property may convey land to a town on the condition that it be used only for church purposes. If the land conveyed is used to build a shopping mall, then ownership would revert to the original owner.

Concurrent conditions are conditions in the law of contracts that each party to the contract must simultaneously perform.

Conditions are the most important terms of the contract. It follows that the breach of a condition would mean that something essential to the contract had failed and as such the contract could not feasibly continue.

Breach of contract allows the claimant to access the full range of contractual remedies. The injured claimant can sue for damages as well as repudiating his own obligations under the contract. Hence, the claimant can consider that his contractual obligations have ceased. Once discharged, he is free from the contract.

Warranties

An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party.

Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. In other situations the law implies a warranty where no express warranty was made. Most warranties are made with respect to real estate, insurance, and sales and leases of goods and services.

A warranty is a contractual term of lesser importance than a condition. Breach of warranty is less significant than a breach of condition, the contract may be able to continue after such a breach

Real Estate

Insurance

Sales and Leases of Goods

The remedies available to a claimant who has suffered a breach of warranty are limited to damages only. The injured party does not have the same right to repudiate the contract and consider themselves discharged from it in the same way as they would for a breach on contract.

Innominate Terms

An implied term of a contract which is neither classed as a condition or a warranty but somewhere in between; an intermediary or innominate term.

'Wait & See' Approach

The courts look at the effects of the breach of the injured party to determine whether the breach itself was of a condition or a warranty.

Innominate Terms are terms whose classification is determined only once the effects of its breach are known.

The courts have flexibility in determining the appropriate remedy ( repudiation and/or damages only) that is fair to both parties.

[1962] 2 QB 26

Concerning Innominate Terms

Facts:

Kawasaki contracted with Hong Kong Fir Shipping to charter a vessel for a period of two years. A term in the contract required that the vessel was 'fitted in every way for ordinary cargo service' and that the owners would 'maintain her in a thoroughly efficient state... during service'.

Soon after beginning the voyage the ship broke down due to the incompetence of its engine room staff and it was discovered that it was not seaworthy and in need of many repairs.

As a result, the claimants were deprived of the use of the ship for 18 weeks while it was repaired to a seaworthy state. Kawasaki wrote to the owners repudiating the charter. Hong Kong Fir brought an action for wrongful repudiation, claiming that the term was only a warranty and not a condition.

Lord Diplock stated that:

There are ... many contractual undertakings of a more complex character which cannot be categorised as being 'conditions' or warranties' ... Of such undertakings all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended and that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend upon the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a 'condition' or a 'warranty'.

The shipowner's undertaking to deliver a seaworthy ship is neither a "condition" nor a "warranty" but one of that large class of contractual undertakings one breach of which may have the same effect as that ascribed to a breach of "condition" under the Sale of Goods Act 1893 and a different breach of which may have only the same effect as that ascribed to a breach of "warranty" under that Act.